The coronavirus pandemic has been bad news for commercialmortgage-backed securities as $21 billion of CMBS loans has beentransferred to special servicing since mid-March, or more thandouble the value for all of last year.

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Special services took in 439 CMBS loans during March, April andMay, according to  a report by credit rating agency FitchRatings. That's fewer than the 674 CMBS loans that went tospecial servicing last year but with a much higher value than lastyear's $9 billion.

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Transfers to special services were highest in April and thenwent down in May to levels less than those in March.

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Most of the $21 billion hasn't yet been reported as being causedby the economic shutdown imposed to stop the spread of COVID-19,but Fitch in its report attributed the transfers to the pandemic'simpact borrowers and their real estate tenants.

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So far only 8% of the number of loans transferred during thethree-month time span were reported as impacted by the coronavirus.This number could go up as the four biggest master servicers willbe updating information on the transfers.

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Commercial real estate industry group CRE FinanceCouncil issued on May 22 version 8.1 of the Investor ReportingPackage that includes guidance for servicers how to identify loansaffected by the coronavirus. Many transfers already had occurred bythe time the guidance was issued, prompting the big masterservicers to reevaluate the loan transfers.

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Notably, most of the recent loan transfers were either currentor within their grace period by May with 29 loans totaling$242.5 million past their two-month delinquent period.

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Making things even less quantifiable is that the data doesn'tinclude loans that special servicers are looking at as performingloan consents and loans being processes for some form of debtrelief. They aren't listed in transfer reports butcomprise a big chunk of special servicing workouts.

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Hotels are the real estate type representing the most transfersto special servicing followed by retail. They are the asset classesmost impacted by the business closures imposed because of thepandemic, although many have cautiously started reopening imposingcapacity limits.

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The expectation is that loan transfers in the near future willbe driven by office and retail properties, Fitch said in itsreport.

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In total in 2020, 473 loans were transferred to specialservicing, including loans transferred in January and Februarybefore the onset of the pandemic. Out of those, the majority aresingle asset/single borrower, of SASB, transfers at 59%.

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Fitch expects forthcoming transfers will be driven by conduitloans.

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The Fitch data was compiled from Fitch-rated special servicers,Trepp data as of May 26 on month-over-month special servicing loantransfers. The data includes CMBS conduit, large loans andSASB loans but excludes agency loans, single family rental andsmall balance loans from its analysis.

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Lidia Dinkova

Lidia Dinkova covers South Florida real estate for the Daily Business Review. Contact her at [email protected] or 305-347-6665. On Twitter @LidiaDinkova.